TORONTO, ON, Jan. 8, 2016 (Press Release) -On January 7, Verso Paper Holdings LLC (“Verso”, Caa2 negative) announced that it has sold its subsidiary, Verso Androscoggin Power LLC (VAP) to Eagle Creek Renewable Energy LLC (unrated) for about $62 million. The sale is credit positive because it will strengthen the company’s liquidity position with no significant impact on operations and minimal cost impacts. Verso’s Caa2 Corporate Family Rating, SGL-4 Speculative Grade Liquidity rating and negative outlook remain unchanged.
Sale proceeds will bolster the company’s liquidity position as Verso continues to explore potential debt restructuring alternatives and while it continues to integrate NewPage (which it acquired January 2015). However, Moody’s expects the company’s liquidity to remain weak with few remaining non-core saleable assets, limited covenant headroom and expectations that the company will continue to utilize its credit facilities to fund cash requirements. Prior to the sale, Verso had about $10 million of cash and $62 million of committed unused availability (at 9/2015) to fund about $77 million of debt maturing in 2016. While we expect Verso will generate positive free cash flow over the next 12 months, the company will require further borrowing to service its debt.
Located in Maine, VAP owns four hydroelectric generation facilities associated with Verso’s Androscoggin pulp and paper mill. The sale is not expected to impact operations at the mill, which will continue to purchase electricity from VAP following the transaction.
Headquartered in Memphis, Tennessee, Verso is the largest coated paper producer in North America with proforma annual sales of about $3 billion. On January 7, 2015, Verso acquired NewPage Corporation for $1.4 billion. On November 16, 2015, the company announced it engaged advisors to explore potential restructuring alternatives.